Spain plans to offer foreigners residency permits if they buy houses worth more than 160,000 euros – approximately £128,500 – to try and reduce the country’s bloated stock of unsold homes.

Spain currently has more than 700,000 unsold houses following the collapse of its real estate market in 2008.

Trade Ministry secretary Jaime Garcia-Legaz said the plan, expected to be approved in the coming weeks, would be aimed principally at the Chinese and Russian markets as the domestic demand was stagnant and showed no sign of improving.

Badly hit: Spain has more than 700,000 unsold homes sitting vacant after its property boom collapsed in 2008

New measures: Foreigners who buy property worth more than 160,000 euros – approximately £128,500 – would be given residency permits under new proposals

The country’s economy is still struggling and is currently in recession with 25 per cent unemployment.

Thousands of houses have been repossessed by banks and their owners evicted because they cannot pay their mortgages.

The government last week approved a decree under which evictions would be suspended for two years in specific cases of extreme need.

The country’s offer beats others in bailed-out countries such as Ireland and Portugal, where residency papers are offered to foreigners buying houses worth more than 400,000 euros – around £322,000) and 500,000 euros – approximately £402,000 respectively. It was not immediately clear if the residency would only refer to Spain, and not the European Union.

The stricken state of the country’s real estate market was highlighted Monday by figures from the Bank of Spain which showed that the level of bad debt in the country’s banks had risen to a record 10.7 per cent of their loan total in September.

Struggling: Many home owners in Spain have been struggling to pay their mortgages

Unhappy: Residents in Madrid pictured protesting against evictions at the beginning of November after an estimated 350,000 were evicted from their homes in the wake of the recession

The bank said the amount totaled 182 billion euros, up from 179 billion euros in August – the 15th monthly increase in a row.

The 16 other countries that use the euro have agreed to lend Spain up to 100 billion to help support the country’s banks weighed down by these bad loans and investments.

On top of the bank loan, Spain has been under pressure to apply for more outside financial aid to help it manage its debt and deficit.

The European Central Bank has insisted on the move before it will make good on its pledge to buy the bonds of certain troubled countries to help lower their borrowing costs.

Spain says it is waiting to know all the conditions that might come attached to the rescue package before making a decision.

New rules: A new decree means housing evictions for failing to pay mortgages can be suspended for two years in extreme cases

Downturn: Promoters who could sell new homes just by showing crude blueprints a few years ago are now struggling to sell new properties